What Walmart’s Resurgence Means For Retail And The “Pays”

Accomplished public intellectual and post-Keynesian economist John Kenneth Galbraith was well-known for four things.

He didn’t think much of math and science — rather unusual given his choice of a profession that uses complicated math formulas to communicate.

His economic principles were what inspired President Lyndon B. Johnson to kickstart the now-controversial “War on Poverty” program in the 1960s — a series of programs intended to end poverty and racial injustice.

His height: At nearly seven feet (6’9”), Galbraith was really tall.

And his tendency to be highly quotable.

Galbraith was a prolific writer. Over the course of his 97 years, Galbraith penned 48 books and thousands of essays on a variety of topics. His memorable lines in speeches, class lectures and interviews were drawn from the millions of words he wrote, which reflected his beliefs and were laced with a heavy dose of sarcasm.

For instance, economics, he once said, is a useful form of employment for economists. And that the only function of economic forecasting is to make astrology look respectable. Meetings, he also said, are indispensable if you don’t want to do anything.

He also remarked that in politics, it’s admirable to have a short memory.

I’ll leave the color commentary to you.

But whether you think short memories are admirable (or even necessary) in politics, people more generally do seem to suffer acutely from them.

That malady appeared to be an epidemic across most of the web last week, brought on by news of Walmart’s Q3 earnings.

The same media that had declared Walmart a lethargic, brick-and-mortar victim to Amazon’s nimble, eCommerce prowess is now Walmart’s biggest fan. In the course of just three days, we’ve gone from Walmart the slumbering retail giant to Walmart the savvy retailer that’s now Amazon’s number one rival — one that’s even making Amazon sweat — well-positioned to challenge Amazon’s retail rampage.

Of course, the Amazon/Walmart rivalry has always made for good media sport.

It’s a topic that I’ve written a lot about over the years — mostly in the context of what it will take for anyone to offer a viable counter to Amazon and Walmart’s opportunity to leverage its assets, acquisitions and partnerships to become the foil for Amazon’s reinvention of the retail landscape.

The strategic volleying of tools and tactics between them has been truly fascinating to observe over the years.

Walmart was down for the count, given its lack of a strong digital presence, until it bought Jet.com for $3 billion in 2016 and later acquired a few niche eTailers, such as Bonobos and ModCloth. Ever since, Walmart has consistently grown its digital presence each quarter — most recently posting a 50 percent increase in digital sales quarter over quarter in Q3.

Amazon has brought physical retail to its knees and grabbed billions of dollars from bottom lines by crushing it online — until it bought brick-and-mortar grocer Whole Foods last summer for $13 billion. In a strategic move to capture a retail segment that everyone shops, the acquisition also came as a tacit admission of the importance of brick-and-mortar locations in competing effectively in key aspects of retail, like food, even as Amazon now drives almost half of all online spending.

As the strategic volleying continues, Amazon and Walmart will no doubt draw on tools and tactics that reflect their own unique retail street cred, the vantage points they bring from their respective starting points and the important gaps they need to close.

Central to those decisions will be the one tool that they have in common: their own merchant-branded mobile wallets and the power to use them to shape consumer behavior and influence how retail unfolds over the next several decades.


First, There Was Amazon

Amazon not only coined the term one-click checkout, but filed a patent for it in 1997 and secured it in 1999. The ability for a consumer to click and buy anything she wanted on Amazon without the hassle of line after line of forms played a huge part in cementing Amazon’s presence as a dominant retailer on the web.

It still does.

Amazon’s familiar yellow buy button is synonymous with giving consumers the ability to buy millions of products online at low prices and to have them delivered to their doorsteps in one or two days for free. Amazon’s use of data to make sure their prices remain the lowest (when it wants them to be) is legendary. That “Amazon Effect” is why more than 60 percent of consumers start their product searches there, and why in some categories — like books, office supplies, sporting goods and even apparel — Amazon has captured a big swath of consumer spend.

Amazon’s also tried to grow Amazon Pay off Amazon.

Amazon Pay can be found on 10 percent of the top 100 online retailers in the U.S. It is how consumers shopping at Kohl’s this holiday season will pay for the Alexa products they want to buy there, and how consumers pay for the things they buy at Amazon-owned eTailers, like Shopbop. I’ll also bet my incredibly cute little Scottish terrier pup, Charlie, that Amazon Pay will very soon find its way to the point of sale (POS) at Whole Foods.

Amazon also lets shoppers load cash into their Amazon Pay wallets at retail outlets, like 7-Eleven, giving cash-centric consumers the chance to shop on Amazon. Amazon’s even one of a small number of retailers tapped by the U.S. government to allow food stamp recipients to use Amazon to buy groceries online when that program launches.

Amazon has launched a co-branded credit card — Amazon Prime Rewards Visa Signature Card — that offers 5 percent cash back on all purchases made on Amazon, 2 percent on restaurant and fuel purchases and 1 percent on everything else. Amazon’s betting that Amazon Prime users will standardize on that card for their purchases, like Discover cardholders have done using a similar product.

It’s also not possible to add a third-party wallet to Amazon Pay — not today and probably not ever. But it is possible to link a checking account, which bumps the anxiety card networks once had with PayPal to a whole new level.

And, of course, Amazon Pay is the only way to buy with Alexa across its portfolio of voice-activated devices, including Amazon’s app on any mobile phone.


And Then There Was Walmart Pay

Walmart Pay has been in the market for about a year and a half. The pilot that was launched right around this time two years ago completed its full rollout to all U.S. stores in June 2016.

Over that one-year period, Walmart Pay has achieved a level of usage and adoption it’s taken Apple Pay more than three years to reach, but not consistently maintain. Our ongoing research on the topic of mobile payments adoption in-store shows that a staggering 50 percent of Walmart customers say they use Walmart Pay — which can be added to any smartphone — every time they can. None of the other Pays has even achieved half that number.

Walmart Pay’s usage and adoption stats are a result of the consistent experience it offers consumers across all of its stores and inside the Walmart app. Walmart stands for everyday low prices, and its Jet.com acquisition gave it access to a pricing algorithm that calculates prices in real time, based on basket size and what’s been ordered.

Those stats are also a reality because Walmart Pay began as more than an easy way for Walmart’s customers to pay for the things they wanted to buy.

Via its Savings Catcher program, Walmart Pay keeps track of prices and customer savings, used and unused gift cards and receipts and enables pharmacy refills and peer-to-peer (P2P) money transfer. It also allows consumers to load cash so they can shop via their mobile phones.

Walmart Pay drives the order online and pick-up grocery experience that has helped to keep its grocery customers sticky and to acquire more Walmart Pay users. The feature that is now available at roughly 1,000 Walmart stores will be expanded to more than 1,000 more in 2018. It was also cited by CEO Doug McMillon in his Q3 earnings remarks as an important driver of online growth last quarter.

Walmart Pay also enables Walmart’s newly launched Mobile Express Returns program, reducing the time it takes to return an item purchased online to one of its stores to 30 seconds.

Walmart has its own credit card too, and linking that card to Walmart Pay offers 3 percent cash back for purchases made in November and December. Even though PayPal, Chase Pay, Visa Checkout and Masterpass are all available for consumers to use on Walmart.com, it is not possible to link anything but a network-branded debit or credit card — including Walmart’s own credit card, Walmart’s eGift/gift or prepaid card — to Walmart Pay. It’s also not possible, at least right now, to use Walmart Pay on Jet.com, Bonobos, ModCloth or at Sam’s Club — but we can bet that the retailer will evolve to include its mobile wallet as a payment option in time.

However, it is possible to use Walmart Pay to shop and buy using Google’s Virtual Assistant. Instead of building its own hardware, Walmart Pay is leveraging Google’s platform to drive its voice-activated commerce channel forward.


Will Wallets Drive the Future of Retail?

Today, there’s no consistent method for a consumer to pay across all the shopping channels she frequents.

It used to be.

The same plastic cards were used to pay for things at any physical store.

It was consistent when consumers shopped online too: consistently horrible.

And that leveled the playing field.

Awful compared to a little more or less awful wasn’t enough to keep consumers from shopping online or playing the field when shopping online, however. When they were doing it in front of a big screen and a big keyboard, consumers put up with it.

In fact, Cyber Monday was all but created to embrace that awful eCommerce experience — dedicating a whole day for consumers to use their desktops and broadband connections at the office to make the pain of buying things online a little more tolerable.

But that’s not the case anymore.

Without beating the in-store digital wallet dead horse even more, we all know why consumers continue to default to the plastic card — or increasingly use their mobile app or browser to transact remotely or complete purchases in a physical store.

It’s familiar, it’s consistent and it eliminates friction.

Online, consumers now recognize the difference between sites that are awful and sites that are not. And they increasingly point their thumbs to retailers that have integrated mobile payments into a shopping and buying experience that does more than help them pay for what they want to buy.

For retailers that offer that experience — and for consumers who use it — Pay means more than just transacting. For the consumer, it means the assurance that they’re getting the best price without hunting down promo codes, that they’re getting what they ordered in two days for free and that any rewards, discounts or coupons are automatically accounted for.

All those reasons are why payments are and will remain an important cornerstone of Amazon’s and Walmart’s retail strategy — an advantage that accrues to them as they build out their retail ecosystems. When a consumer clicks “pay,” they know they’re getting more value with less friction. Amazon and Walmart know they’ve increased their odds of making a sale and creating an unbreakable habit between them and the customers who increasingly default to their sites and use their method of payment to shop.

So, what does that mean for any retailer that’s not Amazon or Walmart or any digital wallet that’s not Amazon or Walmart Pay?

It means that it’s time for digital wallet providers to think beyond the buy button to become a platform that creates and enables the same kind of integrated payments experience for other retailers.

It also means thinking deeply about how to leverage mobile and digital payments to target the segments where retailers’ pain points are most acute — those places that consumers frequent daily, weekly, monthly — not just every now and then. And how to deliver more value than simply checking out with the remote payments experiences consumers now use increasingly to order their coffee from Starbucks, their lunch from Sweetgreen or their dinner from GrubHub. And to enable that same consistent, value-based experience across the many retailers they visit.

But with Walmart and Walmart Pay and Amazon and Amazon Pay methodically expanding their ecosystems online and offline, there isn’t a lot of time for other retailers, and other Pays, to sit back and keep thinking about how to get it done.

Or how to get started.